We have been reminded a lot, recently, that, since the establishment of FDIC, no one has lost money in a U.S. bank in an account insured by the FDIC. But the head of the FDIC recently upped insurance on accounts. Why? She blurted out the truth: The account insurance system may itself be insolvent.
Panic ensues. People with lots of dough (not me) have been pulling cash from banks in the hundreds of thousands, the millions.
On a bright note, the sales of safes are way up.
Somehow, I don’t think that’s the stimulus our leaders were aiming at.
Though every downturn, like every spurt of progress, is different, this downturn has more than a whiff of the stench of the Great Depression about it. What reeks? Our sense of the future.
An economy such as ours depends on a sense of stability about the future. It rests on stable policy, and the perception of same. The only thing stable about the stories coming from the White House has been the huge hunks of money being doled out. Everything else has been contradictory and at cross-purpose.
Fear itself. Roosevelt was right, that is the biggest problem. But Roosevelt was wrong moving beyond this homily: His flailing from policy to policy gave the investment sector a sense of paralyzing fear. Capital was withheld. The depression drew on and on.
And it’s happening all over again. The policy announcements, the revisions, the regrets — they keep on coming from the White House and Capital Hill. And the swings from rationale-to-rationale can have a horrible cumulative effect, dashing all expectations of hope and confidence in policy, signaling to investors to withdraw from investing.
Yet even that isn’t the worst of it. The worst of it is our gargantuan government debt, both explicit (issued and traded and monetized) and implicit (promised in the form of “entitlements” like Social Security and Medicare). Looming over our nation’s head has been this ever-growing public debt. Debt cannot continue to grow and grow.
This is where the current administration’s blunderings, like the last one’s, are so dangerous. Both have panicked, insisting on doing “something” so as to appear to have courage and resolve and all that, while in truth showing little else but very empty hands. And heads.
Of course, if you don’t look closely, it looks like a plan. It’s money. Money, money, and more money.
But no matter how much research we do trying to make sense of our current economic predicament, and the shifting rationales of leaders’ bedrock policy — no matter whether your explanations tend to lean Post Keynesian or monetarist or Austrian or what-have-you — one truth remains abundantly evident: it’s money we don’t have, and spending it increases debt. And that hastens the final wave, the last wave. A tsunami.
Our politicians, too shortsighted to see the damage they do, continue to draw nearer that last wave of financial disaster.
It’s all these trillions spent. And owed. The Congressional Budget Office recently reported that its estimate of the national debt is $2.3 trillion more than figured by Obama’s team. And while Congress trusts the CBO rather than any administration’s BS, astute observers of debt know that both estimates are far too low.
Spend a trillion here, a trillion there, and pretty soon it adds up to . . . unreal money, as the dollar collapses, inflation goes hyper, and the real crisis begins.